Transcript laudon-traver_ec10_ppt_ch06 (2)

E-commerce 2014
business. technology. society.
tenth edition
Kenneth C. Laudon
Carol Guercio Traver
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
Chapter 6
E-commerce Marketing and Advertising
Concepts
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
Class Discussion
Video Ads: Shoot, Click, Buy
What advantages do video ads have over
traditional banner ads?
 Where do sites such as YouTube fit in to a
marketing strategy featuring video ads?
 What are some of the challenges and risks of
placing video ads online?
 Do you think Internet users will ever develop
“blindness” toward video ads as well?

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
Slide 6-3
Consumers Online: The Internet
Audience and Consumer Behavior
Around 70% (85 million) U.S. households have
broadband Internet access in 2013
 Growth rate has slowed
 Intensity and scope of use both increasing
 Some demographic groups have much higher
percentages of online usage than others

 Income, education, age, ethnic dimensions
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Slide 6-4
Consumers Online (cont.)

Broadband vs. dial-up audiences
 50% of Hispanic and African-American homes have
broadband
 40% of households with less than $20k in annual
income have broadband

Neighborhood effects
 Role of social emulation in consumption decisions

Social emulation is the idea where whenever individuals buy cultural
products conspicuously, they do it in order to emulate or ‘imitate’ their
superiors or those in the higher-class sections of the social hierarchy.
 “Connectedness”


Top 10–15% are more independent
Middle 50% share more purchase patterns of friends
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Slide 6-5
Consumers Online (cont.)
 Recommender systems or recommendation systems
are a subclass of information filtering systems that seek
to predict the 'rating' or 'preference' that users would
give to an item
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Slide 6-6
Consumer Behavior

Study of consumer behavior
 Attempts to explain what consumers purchase and
where, when, how much, and why they buy

Consumer behavior models
 Attempt to predict or explain wide range of consumer
decisions
 Based on background demographic factors and other
intervening, more immediate variables

Profiles of Online Consumers (See Table 6.2)
 Consumers shop online primarily
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for convenience
Slide 6-7
The Consumer Decision Process and
Supporting Communications
Figure 6.2, Page 334
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Slide 6-8
A General Model of Consumer Behavior
Figure 6.1, Page 333
SOURCE: Adapted from Kotler and Armstrong, 2009.
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Slide 6-9
The Online Purchasing Decision
 Five stages in consumer decision
process
 Awareness of need
 Search for more information
 Evaluation of alternatives
 Actual purchase decision
 Post-purchase contact with firm
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Slide 6-10
The Online Purchasing Decision (cont.)
Decision process similar for online and offline
behavior
 General online behavior model includes

 Web site features (delay, usability, and security)
 Consumer skills regarding online purchasing
 Product characteristics (prod desc, ability to be shipped
over the internet)
 Attitudes toward online purchasing
 Perceptions about control over Web environment
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Slide 6-11
The Online Purchasing Decision (cont.)
Decision process similar for online and offline
behavior
 Clickstream behavior refers to the transaction
log that consumers establish as they move
about the web from search engine to
websites, to pages, to the decision to buy

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Slide 6-12
A Model of Online Consumer Behavior
Figure 6.3, Page 335
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Slide 6-13
Shoppers: Browsers and Buyers

Shoppers: 89% of Internet users


73% buyers
16% browsers (purchase offline)
One-third of offline retail purchases influenced by
online activities
 Online traffic also influenced by offline brands
and shopping
 E-commerce and traditional commerce are
coupled: Part of a continuum of consumer
behavior

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Slide 6-14
What Consumers Shop for and
Buy Online

Big ticket items ($1000 or more)
 Travel, computer hardware, electronics
 Consumers now more confident in purchasing
costlier items

Small ticket items ($100 or less)
 Apparel, books, office supplies, software, and so
on

Types of purchases depend on level of
experience with the Web
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Slide 6-15
How Consumers Shop
 How shoppers find online vendors
 Search engines
 Marketplaces (Amazon, eBay)
 Specific retail site
 27% of Internet users don’t shop online
 Trust factor
 Hassle factors (shipping costs, returns, etc.)
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Slide 6-16
Trust, Utility, and Opportunism
in Online Markets
 Two most important factors shaping
decision to purchase online:
 Utility:
 Better prices, convenience, speed
 Trust:
 Most important factors:
Perception of credibility,
ease of use, perceived risk
 Sellers can develop trust by building strong
reputations for honesty, fairness, delivery
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Slide 6-17
Digital Commerce Marketing and
Advertising: Strategies and Tools
 Internet marketing (vs. traditional)
 More personalized
 More participatory
 More peer-to-peer
 More communal
 The most effective Internet marketing
has all four features
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Slide 6-18
Multi-Channel Marketing Plan
1.
2.
Web site
Traditional online marketing

3.
Social marketing

4.
Social networks, blogs, video, game
Mobile marketing

5.
Search engine, display, e-mail, affiliate
Mobile/tablet sites, apps
Offline marketing

Television, radio, newspapers
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Slide 6-19
Strategic Issues and Questions
 Which part of the marketing plan should
you focus on first?
 How do you integrate the different
platforms for a coherent message?
 How do you allocate resources?
 How do you measure and compare metrics from
different platforms?
 How do you link each to sales revenues?
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Slide 6-20
Establishing the Customer
Relationship
 Web site functions to:
 Establish brand identity and customer
expectations
 Differentiating
product
 Inform and educate customer
 Shape customer experience
 Anchor the brand online
 Central point for all marketing messages
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Slide 6-21
Online Advertising
 Online advertising
 Display (banners, videos), search, mobile messaging,
sponsorships, classifieds, lead generation (generation of
consumer interest or inquiry into products or services
of a business),
e-mail
 Online ads are the fastest growing form of advertising
 Advantages:
 18–34 audience is online
 Ad targeting (sending messages to specific groups)
 Price discrimination
 Personalization
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Slide 6-22
Traditional Online Marketing and
Advertising Tools
Search engine marketing and advertising
 Display ad marketing
 E-mail marketing
 Affiliate marketing
 Viral marketing
 Lead generation marketing
 Social, mobile, and local marketing and
advertising

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Slide 6-23
Search Engine Marketing and Advertising
 Search engine marketing (SEM)
 Use of search engines for branding
 Search engine advertising
 Use of search engines to support direct sales
 Types of search engine advertising
 Sponsored links (keyword paid inclusion)
 Keyword advertising (purchase key words by bidding at
search sites)
 Network keyword advertising (Publs join networks
and allow search engine ads to be place on their site for a fee)
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Slide 6-24
Search Engine Marketing (cont.)

Search engine optimization process of improving ranking
of web pages with search engines

Social search
 Utilizes social graph (friend’s recommendations, past
Web visits, Facebook Likes, Google +1’s) to provide
fewer and more relevant results

Search engine issues
 Paid inclusion and placement practices
 Link farms
 Content farms
 Click fraud
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Slide 6-25
Search Engine Marketing (cont.)

Search engine issues
 Link farms are websites that link to one another
 Content farms are companies that generate volumes of
textual content for multiple website to attract viewers
and search engines

They profit by attracting large numbers of readers and
exposing them to ads
 Click fraud occurs on the Internet in pay-per-click
(PPC) online advertising when a competitor clicks on a
search engine ads forcing the advertiser to pay for the
click even when it is not legitimate.

The process could be automated costing advertisers lots of
money
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Slide 6-26
Display Ad Marketing
Banner ads take customers to advertiser web site
 Rich media ads employ animation & sound
 Video ads
 Sponsorships ads (sponsoring an event)
 Advertising networks help companies take

advantage of internet marketing/advertising

Advertising exchanges and real-time bidding
facilitate booking available ad slots across ad
networks
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Slide 6-27
How an Advertising Network
Such as DoubleClick Works
Figure 6.7, Page 352
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Slide 6-28
E-mail Marketing

Direct e-mail marketing
 Messages sent directly to interested users
 Benefits include




Inexpensive
Average more than 7% click-throughs for in-house lists
Measuring and tracking responses
Personalization of messages and offers
 Three main challenges
 Spam
 Anti-spam software
 Poorly targeted purchased e-mail lists
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Slide 6-29
Spam
Unsolicited commercial e-mail
 65–70% of all e-mail
 Most originates from bot networks
 Efforts to control spam have largely failed:

 Government regulation (CAN-SPAM)
 State laws
 Voluntary self-regulation by industries (DMA )
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Slide 6-30
Other Types of Traditional Online Marketing

Affiliate marketing
 Commission fee paid to other Web sites for sending
customers to their Web site

Viral marketing
 Marketing designed to inspire customers to pass
message to others

Lead generation marketing
 Services and tools for collecting, managing, and
converting leads into purchases
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Slide 6-31
Social Marketing and Advertising
Involves the use of social networks to build brands
and drive revenue
 Fastest growing type of online marketing
 Targets the enormous audiences of social networks
 Four features driving growth




Social sign-on (Facebook & twitter links to login to site)
Collaborative shopping (friends chat online about prods)
Network notification (consumers share their
approval/disapproval)

Social search (recommendations advice from friends and family)
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Slide 6-32
Social Marketing and Advertising (cont.)
 Blog marketing (reaching business' prospects
through the use of a blogs)
 Educated, higher-income audience
 Ideal platform to start viral campaign
 Game marketing
 Large audiences for social games (FarmVille,
Words with Friends)
 Used for branding and driving customers to
purchase moments at restaurants and retail
stores
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Slide 6-33
Mobile Marketing and Advertising
7% of online marketing, growing rapidly
 Major formats:

 Display, rich media, video
 Games
 E-mail
 Text messaging (SMS)
 In-store messaging
 Quick Response (QR) codes
 Couponing

App marketing
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Slide 6-34
Local Marketing

Geared to user’s geographic location
 Local search and purchasing

Local searches:
 25% of all searches
 50% of mobile searches

Most common local marketing tools
 Geotargeting with Google Maps
 Display ads in hyperlocal (information oriented around a
well-defined community)publications
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Slide 6-35
Multi-Channel Marketing
 Average American spends more than
40% of media time on digital media
channels
 Consumers also multitask, using several
media
 Internet campaigns strengthened by
using other channels
 Most effective are campaigns using consistent
imagery throughout channels
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
Slide 6-36
Insight on Business: Class Discussion
Are the Very Rich Different from You and Me?
What distinguishes luxury marketing from
ordinary retail marketing?
 What challenges do luxury retailers have in
translating their brands and the look and feel
of luxury shops into Web sites?
 How has social media affected luxury
marketing?
 Visit the Armani Web site. What do you find
there?

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
Slide 6-37
Other Online Marketing Strategies
 In addition to traditional online
advertising and marketing strategies
(search engine, display, etc.), several
other strategies are more focused than
“traditional” online strategies
 Customer retention
 Pricing
 The “long tail” (next slide)
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Slide 6-38
Other Online Marketing Strategies
The “long tail” is a graph
showing popularity ranking. To
the right (yellow) is the long tail;
to the left (green) are the few
that dominate. In statistics, a long
tail of some distributions of
numbers is the portion of the
distribution having a large
number of occurrences far from
the "head" or central part of the
distribution.

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Slide 6-39
Long-Tail Marketing



Internet allows for sales of
 Long tail curve
obscure products with little
demand, the long tale
Long tail marketing concentrates
on these less popular products,
developing a business sales model
based upon products in the “long
tail.”
Substantial revenue because



Near zero inventory costs
Little marketing costs
Search and recommendation engines
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Slide 6-40
Other Online Marketing Strategies
 Customer retention strategies
Personalization and one-to-one
marketing
 Retargeting showing same ads across multiple
websites
 Behavioral targeting
uses data from search engine queries,
clickstream history, social network, and
integration of offline personal data
 Effectiveness still inconclusive
 Privacy issues are a concern

Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
Slide 6-41
Other Online Marketing Strategies (cont.)
 Customization: Changing the product
 Information goods ideal for differentiation
 Customer co-production: Customers
help create or customize the product
 Customer service
 FAQs
 Real-time customer chat systems
 Automated response systems
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
Slide 6-42
Pricing Strategies
 Pricing
 Integral part of marketing strategy
 Traditionally based on:
 Fixed cost
 Variable costs
 Demand curve
 Price discrimination
 Selling products to different people and groups
based on willingness to pay
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Slide 6-43
Pricing Strategies (cont.)

Free and freemium



Versioning


Creating multiple versions of product and selling essentially same
product to different market segments at different prices
Bundling


Can be used to build market awareness
Freemium is where you get a free basic service and the premium
version is not
Offers consumers two or more goods for one price
Dynamic pricing:



Auctions
Yield management
Flash marketing
Copyright © 2014 Pearson Education, Inc. Publishing as Prentice Hall
Slide 6-44
Insight on Technology: Class Discussion
The Long Tail: Big Hits and Big Misses
 What are “recommender systems”?
Give an example you have used.
 What is the “Long Tail” and how do
recommender systems support sales of
items in the Long Tail?
 How can human editors, including
consumers, make recommender
systems more helpful?
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Slide 6-45
Internet Marketing Technologies
 Internet’s main impacts on marketing:
 Scope of marketing communications broadened
 Richness of marketing communications
increased
 Expand information intensity of marketplace
 Always-on mobile environment expands
marketing opportunities
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Slide 6-46
Web Transaction Logs
Built into Web server software
 Record user activity at Web site
 Provides much marketing data, especially
combined with:

 Registration forms
 Shopping cart database

Answers questions such as:
 What are major patterns of interest and purchase?
 After home page, where do users go first? Second?
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Slide 6-47
Tracking Files
Users tracked as they move from site to site
 Four types of tracking files
 Cookies

 Small text file placed by Web site
 Allows Web marketers to gather data
 Flash cookies new way of tracing your movement on the
Internet and storing lots of information about you. (One
disadvantage is that you can't locate them in your browser because
they are clear and not easily seen in the list of cookies which you
can access if you open the browser cookie manager, nor do they
appear in databases or other browser-specific storage locations)
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Slide 6-48
Tracking Files
 Web Beacons (“bugs”) uses Adobe Flash software to keep
track of users navigation through a single website or a series of
websites. They also go by the name of web bugs and are normally
used by websites that use third party traffic monitoring and
tracking services. Web beacons might be used in connection with
cookies to gain an understanding of how a website's users navigate
through and process the content contained in that website. This
came about because users delete cookies making browsing and
tracking difficult
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Slide 6-49
Insight on Society: Class Discussion
Every Move You Make, Every Click You
Make, We’ll Be Tracking You
Are beacons innocuous? Or are they an
invasion of personal privacy?
 Do you think your Web browsing should be
known to marketers?
 What are the Privacy Foundation guidelines
for Web beacons?
 Should online shopping be allowed to be a
private activity?

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Slide 6-50
Databases
Database: Stores records and attributes
 Database management system (DBMS):



SQL (Structured Query Language):


Software used to create, maintain, and access databases
Industry-standard database query and manipulation language used
in a relational database
Relational database:

Represents data as two-dimensional tables with records organized
in rows and attributes in columns; data within different tables can
be flexibly related as long as the tables share a common data
element
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Slide 6-51
Data Warehouses and Data Mining

Data warehouse:
 Collects firm’s transactional and customer data in
single location for offline analysis by marketers and site
managers

Data mining:
 Analytical techniques to find patterns in data, model
behavior of customers, develop customer profiles



Query-driven data mining
Model-driven data mining
Rule-based data mining
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Slide 6-52
Hadoop and the Challenge of Big Data
“Big data”
 Web traffic, e-mail, social media content
 Traditional DBMS unable to process the
volumes—petabytes (1 000 000 000 000 000
bytes) and exabytes (1 000 000 000 000 000 000
bytes)
 Hadoop is an open-source software solution by
Apachie that enables distributed computing of
huge amounts of data including unstructured and
semi-structured on thousands of inexpensive
computers

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Slide 6-53
Customer Relationship
Management (CRM) Systems

Create customer profiles:






Product and usage summary data
Demographic and psychographic data
Profitability measures
Contact history
Marketing and sales information
Customer data used to:



Develop and sell additional products
Identify profitable customers
Optimize service delivery, and so on
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Slide 6-54
A CRM System
Figure 6.10, Page 387
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Slide 6-55
Online Marketing Metrics: Lexicon

Audience size or
market share

(Table 6.7)
Conversion to
customer
 Impressions (# of times Ad is served)
 Acquisition rate (visiting pgs)
 Click-through rate (CTR)
 Conversion rate
 View-through rate (VTR)
 Browse-to-buy ratio
 Hits
 View-to-cart ratio
 Page views
 Cart conversion rate
 Stickiness (duration)
 Checkout conversion
 Unique visitors
rate
 Abandonment rate
 Retention rate
 Attrition rate
 Loyalty
 Reach
 Recency
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Slide 6-56
Online Marketing Metrics (cont.)

Social marketing

E-mail metrics
 Conversation ratio
 Open rate
 Applause ratio (# likes/post)
 Delivery rate
 Amplification (retweets/post)
 Click-through rate
 Sentiment ratio (ratio of
(e-mail)
 Bounce-back rate
positive to total comments)
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Slide 6-57
An Online Consumer Purchasing Model
Figure 6.11, Page 391
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Slide 6-58
How Well Does Online
Advertising Work?
Use ROI to measure ad campaign
 Highest click-through rates: Search engine
ads, permission e-mail campaigns
 Rich media, video interaction rates high
 Online channels compare favorably with
traditional
 Most powerful marketing campaigns use
multiple channels, including online, catalog,
TV, radio, newspapers, stores

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Slide 6-59
The Costs of Online Advertising

Pricing models





Online revenues only


Sales can be directly correlated
Both online/offline revenues


Barter
Cost per thousand (CPM)
Cost per click (CPC)
Cost per action (CPA)
Offline purchases cannot always be directly related to online
campaign
In general, online marketing is more expensive on
CPM basis, but more effective
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Slide 6-60
Web Analytics

Software that analyzes and presents data on each
stage of the customer conversion process






Helps managers




Awareness
Engagement
Interaction
Purchase
Loyalty and post-purchase
Optimize ROI on Web site and marketing efforts
Build detailed customer profiles
Measure impact of marketing campaigns
Google Analytics, IBM Coremetrics, Adobe Analytics
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Slide 6-61
Web Analytics and the Online
Purchasing Process
Figure 6.12, Page 397
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Slide 6-62
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Slide 6-63